BP Air Conditioning Corp. v. One Beacon Insurance Group, 8 N.Y.3d 708 (2007)
An insurer’s duty to defend an additional insured is triggered by the allegations of the complaint and the terms of the insurance policy, and is not contingent on a prior determination of liability against the additional insured.
Summary
This case addresses whether an insurer has a duty to defend an additional insured under a commercial general liability (CGL) policy before a determination of liability. BP Air Conditioning was named as an additional insured on a policy issued to Alfa Piping. An employee of another subcontractor sued BP for injuries sustained at the job site. One Beacon, Alfa’s insurer, refused to defend BP, arguing that its duty was contingent on a finding that the injury arose from Alfa’s work. The New York Court of Appeals held that the duty to defend an additional insured is as broad as the duty to defend the named insured and is triggered when the complaint suggests a reasonable possibility of coverage, regardless of a liability determination. The court modified the appellate division order regarding priority of coverage, remanding for further consideration.
Facts
Henegan Construction was the general contractor for a renovation project. They subcontracted HVAC work to BP Air Conditioning, who then subcontracted steam fitting work to Alfa Piping. The subcontract required Alfa to indemnify BP and name BP as an additional insured on its CGL policy. Joseph Cosentino, an employee of another subcontractor, was injured at the work site and sued Henegan, who then brought a third-party action against BP and Alfa.
Procedural History
Cosentino sued Henegan, who then sued BP and Alfa. BP then commenced a fourth-party action against One Beacon, seeking a declaration of its rights as an additional insured under Alfa’s policy. The Supreme Court granted BP’s motion for partial summary judgment, finding One Beacon had a duty to defend BP. The Appellate Division modified, holding that One Beacon’s coverage was primary. The Court of Appeals granted leave to appeal.
Issue(s)
Whether an insurer’s duty to defend an additional insured under a CGL policy is contingent upon a determination of liability against the additional insured.
Holding
No, because the duty to defend an additional insured is as broad as the duty to defend the named insured and is triggered when the complaint suggests a reasonable possibility of coverage, regardless of a liability determination.
Court’s Reasoning
The Court of Appeals emphasized that an insurer’s duty to defend is “exceedingly broad” and is triggered whenever the complaint alleges facts that suggest a reasonable possibility of coverage. The Court cited Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137 (2006). The duty is based on the allegations of the complaint and the terms of the policy, not on the merits of the underlying claim. The Court stated: “[a]n [a]dditional insured is a recognized term in insurance contracts, . . . [and that] the well-understood meaning of the term is an entity enjoying the same protection as the named insured” (Pecker Iron Works of N.Y. v Traveler’s Ins. Co., 99 NY2d 391, 393 [2003]). The Court reasoned that BP’s reasonable expectation, when requiring Alfa to name it as an additional insured, was to obtain protection from lawsuits arising out of Alfa’s work, which constitutes “litigation insurance”. Denying a defense would rewrite the policy and provide a windfall to the insurer. The court distinguished the case from cases requiring a determination of liability before a defense is owed. The Court also determined that it could not decide on priority of coverage because all relevant policies and parties were not before the court.